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Fitch Affirms Discover Financial Svcs Long-Term IDR at 'BBB'; Outlook Stable.

NEW YORK -- Fitch Ratings affirms Discover Financial Services (Discover) as follows:

--Long-term Issuer Default Rating (IDR) at 'BBB';

--Short-term IDR at 'F2';

--Senior debt at 'BBB';

--Individual at 'B/C;

--Support at '5'.

The Rating Outlook is Stable. Approximately $26.2 billion of debt and deposits is affected by this action. (See additional ratings at the end of this release.)

The affirmation reflects the sound credit card franchise, improved portfolio credit quality metrics relative to other major credit card companies, solid liquidity, adequate capital levels for the assigned rating category, and successful transition to a stand-alone entity. Ratings are constrained by limited revenue diversity, intense industry competition, and heightened legislative and regulatory scrutiny of the credit card industry.

The Outlook reflects the expectation that credit metrics will deteriorate from current levels over the remainder of 2008 as a result of residential mortgage spillover, geographic weaknesses, high consumer debt levels, credit normalization, and a bleaker economic outlook. Credit deterioration combined with significant declines in profitability and/or a weakening funding and liquidity profile could result in negative rating action. Conversely, Discover's ability to grow network volume, improve global acceptance following the purchase of Diners Club, and develop additional funding flexibility while maintaining consistent operating performance and capitalization, could provide positive rating momentum.

In addition, Fitch affirmed the following with a Stable Outlook:

Discover Bank

--IDR at 'BBB';

--Short-term IDR at 'F2';

--Senior debt at 'BBB';

--Short-term deposits at 'F2';

--Long-term deposits at 'BBB+';

--Individual at 'B/C';

--Support at '5'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
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Publication:Business Wire
Date:Jun 2, 2008
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